The culture of a country directly impacts how it conducts international business. Ivey Business Journal notes that “culture profoundly influences how people think, communicate, and behave.” As a borderless business, also known as international business, becomes an everyday part of company growth in today’s world, participants in the new global marketplace need to know how to navigate international cultural differences in business. Many professionals seek to pursue a Master of Business Administration (MBA) to learn about global business marketplace scale and cultural sensitivity tips that can influence the success of their business abroad. Here are just a few key insights that can be gained from such a program.
The Growing Global Business Marketplace
Globalization — The process of creating networks across countries via the exchange of people, information, and goods — is an undeniable driving force in today’s business world. According to the 2018 KOF Index of Globalization, as reported by Statista, the U.S. has a globalization rate of 82.1 out of 100, based on global-minded economic, social, and political factors. To place that score in perspective, in 2017, the U.S. made around $17.7 trillion in global trade value of exported goods, the fifth-highest export volume since 1950 and the highest export volume since 2014, according to Statista. That $17.7 trillion of global export value amounts to 12.06% of the U.S. 2017 gross domestic product (GDP). These high export numbers testify to the global nature of business today.
Companies looking to succeed in such a market must be mindful of cross-cultural collaboration. To strive toward a global business model without considering the customs of other cultures would be problematic, putting off existing clients and ignoring a huge potential client base. Cultural sensitivity is a key soft skill when navigating international cultural differences in business.
Cultural Sensitivity Tips
Because cultural differences are as varied as they are prevalent in our global marketplace, it takes knowledge as well as sensitivity to address them with finesse. Here are just a few cultural sensitivity tips, ranging from researching the culture to maintaining the right mindset, that might help a professional successfully manage international business dealings.
Research the Culture
An essential part of bridging cultural differences in business is researching a given culture’s communication style, dress code, etiquette, organizational hierarchy, the concept of time, and other factors prior to pursuing a business relationship. The following examples, reported by the Open Education Consortium known as BC Campus, show how cultural misunderstandings stemming from lack of basic research can hinder negotiations and even tarnish a company’s reputation.
No Research Done on Cultural Differences
Home Depot. The do-it-yourself (DIY) nature of the company’s brand failed to take off in China, which appropriate research would have predicted. If the company had investigated, it would have known that DIY is often viewed with disdain in China because it is seen as a sign of poverty.
Subway. When the build-your-own-sandwich shop opened in China, locals were confused about how to “build” a sandwich, didn’t believe the tuna was really fish and hated touching their food. Most of all, it turned out that Chinese customers didn’t want sandwiches in the first place, as they tend to prefer rice and pasta to bread.
Research Done on Cultural Differences
McDonald’s. Thanks to research on Chinese consumer habits, the fast-food chain realized that Chinese people consume more chicken than beef. Thus, the spicy chicken burger was offered in Chinese McDonald’s restaurants to much success.
KFC. When KFC looked to integrate its brand with local tastes, the chain decided to get rid of coleslaw for a localized alternative. The brand switched it out for familiar Chinese dishes such as bamboo shoots and shredded carrots.
These are just a few examples of how researching the nuances of a culture can help companies connect with their overseas target audience. For a thorough guide to researching business culture in other countries, consult the Country Commercial Guides on export.gov.
Keep an Open Cultural Mindset
Having the right mindset for international business is crucial. The importance of being sensitive, open, and flexible to the customs of another culture when conducting global business leads to better communication and fewer misunderstandings, which can lead to resounding success. Companies need to adopt the local language, so to speak — sometimes literally. For example, according to Shopify Plus, communicating in the target culture’s language can make or break global e-commerce sales, with 75% of consumers preferring their buying experience to take place in their own language.
There are many cultural differences in business, and they touch on subjects that range from how deals are brokered to the attitude to present to a potential business partner when negotiating. To succeed in markets with cultures different from their own, companies need to cultivate the right mindset in their own company cultures.
Patience. Conducting international business calls for patience, as misunderstandings often occur, and business markets can move at a slower pace than in the United States. Remaining focused on the long-term goal rather than reacting abruptly in the short term tends to produce positive outcomes when it comes to global business transactions. For example, business negotiations in Asia tend to go through several rounds of approval before a business can move forward. This often seems unnecessarily slow to Western partners. However, to do business globally, patients with cultural differences like these is a virtue.
Greetings. When greeting a business associate from another culture, it is important to offer a few words and gestures of greeting in a local manner, which will vary by culture. People might shake hands, hug, kiss, or place palms together in front of their chests, according to export.gov. It is important to know which greeting style is appropriate to avoid offending or creating an awkward social situation.
Titles. Businesspeople must also know how to address their foreign counterparts in a respectful way, taking into consideration local customs. Export.gov has outlined many useful examples: Many countries (such as Denmark, France, Germany, and the United Kingdom) use titles instead of first names unless suggested otherwise. Others (South Korea and Japan) use last names. However, in Thailand, only first names are used (last names are only for special occasions). Meanwhile, in Belgium, “Monsieur” or “Madame” are used for French-speakers while Flemish-speakers use “Mr.” or “Mrs.” To confuse the two is frowned upon.
Find additional tips at the Basic Guide to Exporting on export.gov.
Contact a U.S. Commercial Service Office
Making your way through the challenging obstacle course of international cultural differences can be fraught with unintentional false steps. How can professionals make sure their companies have the cultural insight they need into the country they are doing business with? Experts can help. For example, the U.S. Commercial Service office offers counseling on cross-cultural business practices, market intelligence, and regulatory issues.
Cultural Sensitivity for Success
Understanding international cultural differences in business is integral to success abroad. Professionals can gain the cultural sensitivity necessary for success by advancing their education through graduate-level programs, such as an MBA program. Learn more about how Ohio University’s online Master of Business Administration helps professionals prepare for international business today.
BC Campus, Introduction to Business: 22 Participating in the Global Marketplace
Export.gov, Basic Guide to Exporting
Export.gov, Country Commercial Guides
International Trade Administration, U.S. Commercial Service
Ivey Business Journal, “The Top Ten Ways That Culture Can Affect International Negotiations”
Ohio University, Online Master of Business Administration
Shopify Plus, “Global E-commerce Statistics and Trends to Launch Your Business Beyond Borders”
Statista, Exports of Goods and Services from the United States from 1990 to 2017, as a Percentage of GDP
Statista, Top 50 Countries in the Globalization Index 2018
Statista, Trends in Global Export Volume of Trade in Goods from 1950 to 2017 (in Billion U.S. Dollars)